How to Enrich a Country: Free Trade or Protectionism?

00:08:06
https://www.youtube.com/watch?v=5ITyd1Pzek0

Ringkasan

TLDRThis text examines the longstanding debate between free trade and protectionism. The roots of protectionism can be traced to 15th-century mercantilism, which advocated for minimal reliance on foreign goods to boost national wealth. Adam Smith revolutionized this thinking with his free trade theory, promoting specialization based on strength and mutual benefits of trade. His ideas led to the repeal of Britain's Corn Laws in 1846, highlighting both benefits and severe economic disruptions. While free trade is beneficial as it promotes optimal labor and capital use, it also causes significant human costs, as sectors unable to compete internationally face collapse. To harness free trade's benefits, countries must mitigate downsides through education, retraining, and fair taxation. Neglecting these aspects can lead to political backlash and a resurgence of protectionist sentiment, despite the proven advantages of free trade.

Takeaways

  • ⚖️ Debate between free trade and protectionism continues.
  • 📚 Mercantilism was the precursor to protectionism.
  • 🔍 Adam Smith advocated for free trade and specialization.
  • 🇬🇧 Britain's repeal of Corn Laws tested free trade principles.
  • 📉 Free trade can lead to economic disruption in some sectors.
  • 🏛️ Governments need to mitigate free trade's downsides.
  • 🔄 Economic autarky aims for self-sufficiency.
  • 💡 Education and social mobility are key to supporting free trade.
  • 🚫 Neglect in addressing free trade's human costs causes instability.
  • 🛡️ Modern mercantilists argue for protective trade barriers.

Garis waktu

  • 00:00:00 - 00:08:06

    Modern economies face a dilemma between adopting free trade or protectionism. The debate between these two concepts dates back to the 15th century with the theory of mercantilism, which advocated for economic autarky through protecting local industries and minimizing imports. However, Adam Smith's groundbreaking work in 1776 revolutionized this view by suggesting that nations should focus on their natural strengths and engage in trade, as specialization increases overall wealth. Although free trade has significantly benefitted economies by lowering costs and improving resource allocation, human costs such as job losses are often overlooked. Proponents have failed to implement supportive political programs, leading to instability and allowing protectionist arguments to gain ground. Without proper mechanisms to address these issues, the sustainable benefits of free trade remain compromised.

Peta Pikiran

Video Tanya Jawab

  • What is mercantilism?

    Mercantilism is an economic theory that emphasizes maximizing exports and minimizing imports to increase national wealth.

  • Who challenged mercantilism and how?

    Adam Smith challenged mercantilism by advocating for specialization and free trade, allowing countries to capitalize on their natural strengths.

  • What are the Corn Laws?

    The Corn Laws were protectionist measures in Britain that imposed tariffs on imported grain, later repealed under the influence of Adam Smith's free trade arguments.

  • Why is free trade considered beneficial according to Adam Smith?

    Free trade allows countries to specialize in industries where they have a competitive advantage, leading to overall increased wealth.

  • What are the human costs of free trade?

    Free trade can lead to job losses and economic dislocation in sectors that can't compete with cheaper foreign goods.

  • How can countries mitigate the negative effects of free trade?

    Countries can mitigate negative effects through taxation, retraining programs, and investment in education and social mobility.

  • What led to the repeal of the Corn Laws?

    The repeal of the Corn Laws was influenced by economic arguments promoting free trade, notably by Adam Smith and David Ricardo.

  • What do modern mercantilists argue against free trade?

    Modern mercantilists argue for increasing trade barriers and producing everything within national borders to protect domestic jobs.

  • What needs to be addressed in free trade policies?

    Free trade policies need to address the socio-economic impacts on displaced workers to prevent political instability.

  • What is economic autarky?

    Economic autarky is the economic policy of a country being self-sufficient and independent from international trade.

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Gulir Otomatis:
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    One of the most pressing choices facing modern economies
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    is whether to adopt
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    a policy of free trade
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    or of protectionism,
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    that is, whether to encourage
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    foreign goods into the country with
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    minimum tariffs
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    and allow industries to relocate abroad;
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    or whether to make it hard for foreign firms
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    to sell their goods internally
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    and discourage domestic producers
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    tempted by cheaper wages in other lands.
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    It feels like a very modern dilemma,
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    but the debates between proponents of free trade
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    and protectionism
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    go back a very long way.
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    The argument began in earnest in Europe in the 15th century
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    with the formulation of a theory
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    known as mercantilism
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    the forerunner of what we today
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    refer to as protectionism.
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    Mercantilism was, like nearly every economic theory
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    interested in increasing a nation’s wealth.
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    But, Mercantilists argued
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    that in order to grow richer,
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    a country had to try
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    to make as many things as possible
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    within its own borders
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    Nd reduce to an absolute minimum
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    any reliance on foreign imports.
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    The role of government
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    was to help local industries
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    by applying huge tariffs on imported goods
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    and discouraging foreign manufacturers
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    from competing with local players.
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    A strong country was one that knew how to
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    provide for itself
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    and could achieve almost total independence in trade
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    a goal known as
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    economic
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    economic autarky.
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    The philosophy of mercantilism reigned supreme
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    as the most persuasive theory of economics
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    until the 9th of March 1776
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    the publication date of possibly
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    the most important book
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    in the history of the modern world.
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    In 'An Inquiry into the Nature and Causes of the Wealth of Nations'
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    the Scottish philosopher and economist Adam Smith
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    attempted to dynamite
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    the intellectual underpinnings of mercantilism.
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    Smith argued that the best way for
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    any country to grow wealthy
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    was not to try to make everything by itself,
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    for no country could ever hope
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    to do well in every sector of an economy.
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    Smith observed,
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    that countries naturally had
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    different strengths in particular areas
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    Some were great at making wine,
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    others had talent in pottery,
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    others still might be experts at making lace
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    and it was on such strengths
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    that every country should focus.
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    This was an application
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    at the level of nations
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    of a theory we can understand well enough
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    at the level of individual life.
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    If someone has a natural aptitude
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    for accountancy,
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    it makes no sense for them to spend
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    a considerable part of each day
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    trying also to make cheese,
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    to sew their own trousers
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    or to learn to play violin sonatas.
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    Far better for the accountant,
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    cheese-maker,
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    tailor and violinist
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    to specialize in the areas in which
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    they each have the greatest advantage
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    and then trade with others to
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    satisfy their remaining needs.
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    As Smith noted:
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    “It is the maxim of every
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    prudent master of a family,
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    never to attempt to make at home
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    what it will cost him more
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    to make than to buy.”
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    Smith emphasized that if Britain could
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    produce woolen goods more cheaply
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    than Portugal
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    and if Portugal could produce
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    wine more cheaply than Britain,
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    then it would be beneficial to both parties
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    to exchange the product they
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    could make at a lower cost
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    for the one they could only make
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    at a higher cost.
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    The overall wealth of both countries
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    would rise as labor and capital
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    would always be optimally employed,
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    directed to those sectors
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    where native skill and opportunity
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    was at its greatest.
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    The job of the government
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    was to recognise sectors where
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    there was a national advantage,
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    assist in the education of the workforce,
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    but otherwise, reduce tariffs
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    as much as possible,
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    and step out of the way.
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    With astonishing speed,
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    Smith’s theory convinced most of the economic
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    and political classes of
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    north Western Europe.
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    In Britain, his ideas were
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    first put to a practical test
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    in relation to the primary foodstuff
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    of the nation:
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    corn.
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    Grain prices had, for many years,
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    been protected by government decrees.
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    Cheaper foreign grain had been kept out,
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    apparently in order to
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    protect jobs and national wealth.
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    But Smith’s ideas,
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    now driven forward by his foremost
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    disciple David Ricardo,
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    proposed that all tariffs on imported grain
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    protectionist measures known as
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    The Corn Laws
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    were in fact obstacles to economic growth.
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    After bitter debates in Parliament,
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    the laws were repealed in 1846.
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    The result demonstrated both
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    the advantages and incidental
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    costs of Smith’s ideas:
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    the price of corn dropped sharply,
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    food became cheaper
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    and everyone, especially
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    the working classes,
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    had a lot more spare money
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    to spend on other goods,
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    This, in turn
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    grew the overall size of the
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    British economy,
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    so that it significantly outperformed
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    all of its European counterparts.
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    But – and it was a very big but
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    large swathes of British agriculture
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    went to the wall.
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    Cheap imported corn, from
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    Canada and the United States,
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    destroyed farms
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    and ways of life that had persisted for centuries.
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    Smith’s theories were both correct
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    and, depending on where one was standing,
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    plainly agonizing.
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    An enduring problem for the undoubtedly very
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    sound arguments in favour of free trade
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    is that its human costs
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    have seldom been addressed
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    with sufficient passion
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    and ingenuity.
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    The cries of the dispossessed
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    have not been recognised for what they are:
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    threats to the entire stability
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    and moral dignity of a nation.
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    As has only gradually been realised,
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    the benefits of an open economy
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    can only properly bear fruit
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    if a series of steps are taken to mitigate
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    the attendant downsides.
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    Any nation committed to free trade
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    must tax the sectors of the economy
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    which have an advantage
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    and then use the money
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    to retrain those in the
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    sectors of the economy
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    with the gravest disadvantages
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    in relation to foreign competition.
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    Without such redirection of money and labor
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    a nation will become highly
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    unstable politically
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    thereby endangering
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    any progress that free trade has made.
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    Secondly, governments must enable
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    everyone in the economy
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    to find their own natural areas of strength;
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    which means high levels of investment in education
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    and a raft of measures to maximize social mobility.
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    Monopolistic behaviour by the rich
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    endangers the integrity of a free trade system
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    just as much as punitive import tariffs.
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    Intellectually, free trade has
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    undoubtedly won the argument.
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    When a Mexican worker can make a car
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    for eight dollars an hour,
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    whereas an American one
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    costs 58 dollars an hour,
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    it is clearly wise to allow Mexico
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    to do what it can do best,
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    whatever the effect on American car workers.
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    However, defenders of free trade
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    have been grossly negligent
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    when it comes to instituting
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    the political programs necessary
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    to support the efficient
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    operations of the system.
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    It has forgotten the pain
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    of the car workers,
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    the coal miners and the steel makers.
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    And, in democracies,
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    there has been a heavy price
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    to pay for this neglect,
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    in the form of the rise of a new
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    class of mercantilists,
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    who have successfully argued that
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    barriers must again increase,
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    that a country should try to make
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    everything within its own borders
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    to regain its greatness
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    and that cheap importers
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    are invariably the
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    destroyers of domestic jobs.
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    These arguments make no sense,
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    but so long as the proponents of free trade
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    fail properly to articulate a program
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    to remedy free trade’s operations,
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    whole nations will be seduced by the
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    easy promises of the mercantilists
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    and will suffer accordingly
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    until the distinctive wisdom
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    of Adam Smith can once more
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    reassert itself.
Tags
  • Free Trade
  • Protectionism
  • Mercantilism
  • Adam Smith
  • Economic Theory
  • Tariffs
  • Corn Laws
  • Economic Autarky
  • Specialization
  • Education